Grim Economics of Shutdown Balances Death Against Unemployment
- Reopening earlier could have meant 172,000 more fatalities
- Younger people are disproportionally hurt by lost pay checks
A medical worker walks past the bodies of deceased patients from a refrigerated overflow morgue in Brooklyn, New York on April 3.
Photographer: Angus Mordant/BloombergThese are the grim economics of the Covid-19 pandemic: Younger workers start getting paid again if everyone goes back to work sooner, but older Americans are more likely to die from spreading infection, according to researchers at the Federal Reserve Banks of Kansas City and Minneapolis.
The tradeoffs aren’t easy. The researchers estimate that ending shutdowns in early April would have resulted in another 172,000 deaths over the course of the pandemic; that’s about four times the approximately 43,000 people who have died in the U.S. so far. Meanwhile, the closures are likely to push U.S. unemployment above 30% in the second quarter, according to the Federal Reserve Bank of St. Louis.
“The elderly gain much more than the young from extensive reductions in economic activity,” write Andrew Glover of the Kansas City Fed and Jonathan Heathcote of the Minneapolis Fed joined by two University of Pennsylvania economists in research on the distributional impact of pandemic control. “Our baseline calibration suggests that the shutdown in place on April 12 was too extensive but that a utilitarian planner would keep a partial shutdown in place through July.”